Klarna reported for Q2-2023 today. It had 5.5 billion SEK in Q2 revenue and a -0.9 billion SEK net loss (on an IFRS basis), with May profitable on a stand-alone basis. It is clear that Klarna by growing revenue in the 15-20 % year-over-year range and having made cost cuts is moving in the direction of becoming profitable, quite likely in Q3 or Q4 this year.
Month: August 2023
Benchmark: Top 10 % of SaaS companies reach $1 million in ARR 9 months after first sale
ChartMogul CEO Nick Franklin shared the SaaS Growth Report: How SaaS Businesses Grow From Zero to $30M ARR and Beyond. There are a bunch of interesting data points, but a series of data points that caught my eye is how fast the best SaaS companies reach $1 million and $10 million in ARR from making the first sale. And they do it fast.
The top 10 % reach $1 million in ARR in 9 months and the top 25 % reach it in 1.5 years.
The top 10 % reach $10 million in ARR in 2 years and 9 months and the top 25 % reach it in 3 years and 8 months.
Worth remembering is that on other SaaS metrics, startups need to be in the top 10 % for multiple rounds of venture capital to be a great fit.
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Burn multiple
A oldie but goldie on evaluating revenue growth vs losses by David Sacks: The Burn Multiple. “The beauty of the Burn Multiple is that it’s a catch-all metric. Any serious problem will eventually impact the Burn Multiple by either increasing burn, decreasing net new ARR, or (most tricky) increasing both but at disproportionate rates.”
Start with a small market and expand
There is a lot of wisdom in starting with a small, well-defined market segment in which initial customers love your service, capturing a high market share in that segment, and then expand into an adjacent market segment, and than another and so on.
Tech IPOs coming back (Instacart and Klaviyo)
It is a good sign for the startup world that well-performing technology companies are filing to go public. Marketing firm Klaviyo (S1 filing with the SEC) and Instacart (S1 filing with the SEC). They seem like solid IPOs, as both are at significant scale (Klaviyo at $500+ million in revenue and Instacart at ca $3 billion) and both net income profitable. In short, they are the type of companies that founders should aim to build their startups into. At least if they decide to raise large amounts of venture capital. A nice touch is that Klaviyo’s founder owns 38.1 % of the outstanding shares when going public!
On selling Anchor to Spotify
Hunter Walk has a really good interview with Michael Mignano (founder of Anchor and today VC at Lightspeed).
Interesting read as it covers timing of selling a company (Anchor sold to Spotify), the strength of Silicon Valley and how NYC compares (Stockholm closer, while still smaller, to NYC than SV), and the very important impulse ex-founder investors really should understand (listen to the founders plan, don’t think they will build the way you think they should build).
Tips for non-technical founder to hire and manage a CTO (by Sebastian Siemakowski, CEO & founder of Klarna)
A good post by Sebastian Siemakowski on how to avoid some of the mistakes Klarna did in the early days.
1. Ask the CTO how they do their job
2. Ask other CTOs how they would solve your problems
3. Get advice from people who have seen technology companies grow, but make sure they know what they are talking about
Positive change is possible
My friend and Finnish startup founder and investor Ville Vesterinen has started to write longer essays. His latest is Have we forgot that change is possible?
“If technology can drive change and solve our problems, why has it not done so already? Just as it’s important to understand that change is possible, it’s equally important to understand that it’s not automatic. We need to believe it’s possible, want it, and work hard for it.”
Being local in the Nordics
This morning I travelled to Helsinki for a board meeting and to meet with interesting startups.
Alliance VC invests across the Nordics, which I believe it is an advantage compared to only invest in startups from e.g. Sweden or Norway. The main reason is that the ecosystems give birth to slightly different types of startups, which gives a wider variety of startups on a Nordic level compared to what can be found in any individual Nordic country.
But early-stage investing, and the following 10 year journey of building a company, is to a large extent a local pursuit. That’s why I took the first flight from Stockholm to Helsinki this morning.
Sell doing the job instead of selling software licenses
Sarah Tavel, a partner at Benchmark, wrote the post AI startups: Sell work, not software. If a LLM can deliver a final work product, it is likely possible to get significantly better paid delivering the work rather than selling software. More operationally demanding most likely, but that is part of the trade-off.
It is not entirely dissimilar from how consumer technology startups power a service that deliver the product, rather than selling B2B to others.